In this issue of the Civil Society Newsletter, we offer an interview
with Masood Ahmed, who recently took a two-year leave of absence
from his position as Deputy Director of the IMF Policy Development
and Review Department, where he had played a leading role in the development
of Fund policies toward low-income countries. He has joined the U.K.
Department for International Development as Director General, Policy
and International. The interview makes clear Masood's role in helping
to define IMF policies in a wide range of areas. But it also makes
clear that the work with poor countries will continue to evolve in
his absence.

One area in which this evolution is taking place involves the Fund's
work on debt sustainability, the subject of a new
paper on which public
comment is being sought. That paper itself is part of a broader reassessment
of the role of the IMF in low-income countries that will become an important
part of our outreach in the coming months.

Important progress has been made in recent months in developing a guide
for IMF staff relations with civil society organizations (CSOs). As reported
in the last two editions
of the Newsletter, Prof. Jan Aart Scholte, of the Centre for
the Study of Globalization and Regionalization at the University of Warwick
in the U.K., has been preparing a draft of the guide in consultation
with both IMF staff and civil society representatives.

The comments from both the Fund and CSOs, as might be expected, were
wide ranging and thought provoking. Scholte has incorporated these comments
into a revised draft, which he has sent to the IMF. Scholte plans also
to provide a copy of the revised draft to the individuals and CSOs who
reviewed the first version. IMF staff expect to prepare a final draft
of the guide in the next few weeks, which can then be issued to staff.
At the same time, the guide will be posted on the Fund's external website,
with an invitation to the public to comment. We envisage that the guide
will be revised, refined, and updated after a period in which it is used
by Fund staff in the field. Future issues of the Newsletter will
offer updates on the topic.

Masood Ahmed, Deputy Director of the IMF Policy Development and Review
Department since 2000, has been named to a two-year appointment as
Director General, Policy and International of the U.K. Department for
International Development. At the Fund, Ahmed has played a leading
role on a range of issues related to low-income countries, including
coordinating the implementation of the Poverty Reduction and Growth
Facility (PRGF) and the development of the Poverty Reduction Strategy
Papers (PRSP) approach. He has also been a high-profile spokesman for
the Fund on matters related to poverty reduction. Before joining the
IMF, Ahmed worked at the World Bank for 21 years, rising to Vice President
in 1997. He spoke to the Civil Society Newsletter in late June, on
his last day at the IMF.

Q: To what extent have anti-poverty objectives become part of the
IMF culture?

A: Over the past three or four years there has been a much
more direct focus on how the Fund can contribute to improving living
standards of poor people, on how we can manage poverty and the social
impact of policies that we recommend. Now most Fund mission chiefs
working on low income countries think much more systematically about
the impact on the poor of the policies and programs that a country
is undertaking.

While the quality of the analysis is still uneven, we want to make
sure also that the analysis is feeding into the dialogue about policy
choices and tradeoffs—that it is not simply about how you mitigate
the effect of policies on the poor. It is a tool that needs to feed
back into the policy dialogue, not simply a downstream calculation
and mitigation process. I think that is still at an early stage.

Q: What are the organizational results of this evolution in thinking
at the IMF?

A: The basic difference is that we have much greater clarity
about what is expected of the Fund in this area. We have clearer expectations
of what the key features of the PRGF ought to be. We have clearer rules
on what the Fund's involvement in the PRSP process ought to be. We
have a clearer sense of how the Fund should be working on conditionality
in terms of streamlining and focusing that conditionality on our core
areas. We have a clearer sense of how the Fund should be working with
the World Bank. We have a better sense of how the Fund and the UN should
support the Millennium Development Goals process. We have built a much
stronger community of mission chiefs working on low-income countries.
They meet regularly; they interact with each other to look at common
issues. With partners outside the Fund, issues being discussed include:
how does the focus on poverty and on the Millennium Development Goals
change the way we do macroeconomic analysis? The Fund has been working
on the latter issue with the World Bank, with the U.K. Department for
International Development, with the Dutch government and others. We
recently hosted a conference at the Fund of people working on this
issue in different agencies, including academic institutions and civil
society organizations.

Q: What are some of the key tasks that remain?

A: The challenge is to implement change at the country level,
in the basic design of our programs, in the way in which those programs
are developed and negotiated with our interlocutors in country authorities,
in the way in which our mission chiefs and our resident representatives
interact with other donor agencies and with civil society. We have
the institutional policies and expectations; now we have to apply them
systematically in our everyday work with member countries.

Q: Are there new gauges by which progress in the struggle against
poverty can be measured?

A: We are working much more closely with the UN now on trying
to define the indicators which will enable monitoring of progress toward
the MDGs. We are working to define how the Fund can specifically contribute
to this process and what should be the indicators by which we measure
our own effectiveness.

Q: In what part of the world is the redefinition of IMF anti-poverty
policy most advanced?

A: Africa is very much the center of all of this work. There
is a lot of effort in the African Department of the IMF to build on
the framework that has been developed over the last few years and to
use it as an organizing mechanism for our work in countries. Obviously,
in some cases it adds to the burden on already-strapped resources in
the departments. But I don't think there is an alternative, because
this is now the internationally accepted framework. The Fund is very
much part of having helped to define it.

Q: To what extent is the new doctrine of focusing on poverty institutionalized
at other multilateral organizations?

A: Over the past 10 years there has been a progressive increase
in the focus on poverty issues in the work that multilateral organizations
do. Specifically over the past four to five years, there has been a
much greater attempt at organizing the assistance by multilateral institutions
around the core objective of reducing poverty and meeting the Millennium
Development Goals. Some instruments have helped increase the operational
focus on the antipoverty goals in the multilateral institutions. These
instruments are, at the national level, the concept of the Poverty
Reduction Strategy Paper, which serves as a framework for organizing
the country's own efforts around poverty reduction, and organizing
donor assistance and development support around the same objective.
The second instrument is, at the international level, the agreement
around the Millennium Development Goals as reflected in the Monterrey
Consensus.

Q: In a global climate in which uncertainty dominates the economies
of the big industrialized countries—is this uncertainty running
stronger than commitments to support anti-poverty work?

A: I'm heartened by what I see happening in a number of countries
in following through on the commitment to increase aid. In the post-Monterrey
period aid flows are supposed to increase substantially by 2006. The
United States has come through with a big increase in aid, and also
more of a renewed focus on how to make that aid more effective. The
European Commission has made a commitment to increase aid. Individual
countries within that community are taking action to deliver on that.
I am also quite heartened by what I see happening on aid delivery mechanisms,
which reflect a commitment to harmonize efforts, and reduce the costs
of doing business for poor countries.

Q: The issue of protectionism by industrialized countries has not
been resolved.

A: But you see a growing awareness of the link between trade
and agricultural issues and their impact on the poor. There is now
far more press coverage of how subsidies for cotton farmers in the
U.S. force West African cotton farmers—who are competitive—out
of a job. The fact that these issues are being given the prominence
that they are is important. The fact that so many people now can cite
statistics about the one billion dollars a day in agricultural subsidies;
about the fact that a European cow receives a larger daily contribution
from European consumers—$2 a day—than the income of half
the world's people. The fact that all of this is playing in the media
means that people are becoming aware. That creates an inevitable process
that leads to change. These changes are not going to be easy. They
are not simply about handing out money. They are about structural changes,
and structural changes in economies and societies are difficult, as
developing countries have been trying to say for a long time.

Q: Will your departure weaken the new emphasis on anti-poverty
work at the Fund?

A: Individuals make a difference, but institutions are much
bigger than individuals. I hope that in the time that I have been here
I have been able to contribute to providing some impetus to the way
in which the Fund has developed. There are many people in the Fund
who are now ready to take on this role. It is not a role that can or
should be thought of as synonymous with an individual. In particular
(Policy Development and Review Department Deputy Director) Mark Allen
will bring new energy, new ideas, new perspectives for taking work
on development issues forward. And I also look to coming back in two
years time and seeing how, with this additional experience, I can contribute
to the Fund's mission.

The IMF has invited public
comment on a paper about debt sustainability in low-income countries.
The paper is
intended to help in devising a policy framework—under development
in close consultation with the World Bank, official creditors and debtors—that
would guide low-income countries in their borrowing practices.

The debt-sustainability paper—and request for public comment—is
part of a broader effort to define a policy framework for the Fund's
work in low-income countries for the long-term. In the coming weeks,
the IMF Board also will consider an issues paper on "The Role of
the Fund in Low-Income Countries Over the Medium Term" that will
begin to address many of the key issues related to how the Fund can support
low-income countries and contribute to the global effort to achieve the
Millennium Development Goals. That paper will be accompanied by a separate
paper examining the impact of exogenous shocks (natural disasters, commodity
price fluctuations etc.) on low-income countries. A major outreach effort
that will include consultations with civil society is anticipated.

The issuance of the debt sustainability paper was preceded by three
workshops on debt sustainability and development financing attended
by IMF staff. The workshops were organized by the Agence Française
de Développement in Paris on May 14, by InWent, Capacity Building
International of Germany in Berlin on May 19-20, and by the Commonwealth
Secretariat and the World Bank in Accra, Ghana, on June 9-10. Besides
Fund and Bank staff, participants included government officials and
representatives from civil society.

The debt sustainability paper was discussed by the Executive Board of
the IMF in an informal seminar on July 11. Comments on the paper are
invited by September 30, and should be sent by email to LICDebtSust@imf.org.

IMF Managing Director Horst Köhler conducted
a four-country tour of Africa July 6-11 as part of his ongoing
effort to consult actively with key policymakers in the region on issues
related to poverty reduction and the promotion of long-term economic
growth.

The Managing Director's visit took him to Ethiopia, Kenya, Madagascar
and Mozambique, where he also participated in the summit of the Heads
of State of the African Union. It was Mr. Köhler's fourth trip to
sub-Saharan Africa since assuming office in 2000.

In his address to
the Heads of State, the Managing Director offered a firm commitment to
provide Africa with the expertise and financing to help make significant
progress toward meeting the Millennium Development Goals, which call
for a halving of poverty between 1990 and 2015. He restated his call
for the developed countries to meet their commitments to offer aid and
trade opportunities to Africa, and he encouraged African leaders to take
steps to enhance governance, sustain growth, encourage private investment,
and promote regional cooperation.

In Ethiopia, he reiterated Fund support for the government's economic
policies and was able to obtain a first-hand view of the responses to
the economic and social challenges created by the current drought, which
has made food insecurity the Ethiopian government's top priority. He
also met with about 140 members of civil society, including representatives
of NGOs, labor unions and the private sector. Two topics figured in all
meetings—the country's Sustainable Development and Poverty Reduction
Program, and the role of the private sector in economic development.
The Ethiopian news agency ENA reported that Prime Minister Meles Zenawi
said after his meeting with the Managing Director that Ethiopia and the
IMF are working together "with a great sense of cooperation and
understanding on various issues." Mr. Meles said that while there
are points of divergence on some issues, Ethiopia has forged a sound
relationship with international financial institutions.

In Kenya, Mr. Köhler met President Mwai Kibaki, his finance and
economy team, and the leader of the parliamentary opposition. The Managing
Director expressed his support for the government's strategy. He cited
its fiscal prudence, its expenditure restructuring in favor of health
and education programs, and its anticorruption measures.

In Madagascar, Mr. Köhler met with President Marc Ravalomanana,
Prime Minister Jacques Sylla, and members of the government. The Managing
Director said he was pleased with the recent completion of Madagascar's
Poverty Reduction Strategy Paper, which benefited from wide consultation
among different groups, including civil society.

In Mozambique, he met with President Joachim Chissano, several key members
of the government and representatives of the private sector. He commended
President Chissano on Mozambique's progress in improving economic policies
and social conditions.

The IMF has expanded the territory covered by its centers to promote
capacity-building in Africa. The West Africa Regional Technical Assistance
Center (West AFRITAC)
was opened in May in Bamako, Mali, to cover ten francophone countries
in sub-Saharan Africa. Its inauguration follows the opening of an East
Africa counterpart, which began operations last year in Dar es Salaam,
Tanzania

Technical Assistance is a familiar part of the development lexicon.
But in the AFRITAC context, the term has a particular meaning. The centers'
basic mission is to strengthen the ability of governments to design and
carry out their own pro-growth poverty-reduction plans. These are set
out in Poverty Reduction Strategy Papers, which have become the basic
tool by which countries set out their development ideas.

Through the AFRITACs, teams of resident experts, supplemented by short-term
specialists, provide assistance in the core specialties of the IMF. Among
the topics: macroeconomic policy, microfinancing, financial sector policies,
tax policy and revenue administration, exchange rate administration,
public spending management and macroeconomics statistics.

The West AFRITAC is part of the IMF's response to calls by African leaders,
including those expressed under the New Partnership for Africa's Development
(NEPAD). The initiative builds on efforts by officials of the countries
in its territory, the African Capacity Building Foundation, the African
Development Bank and the Banque Centrale des États de L'Afrique
de l'Ouest (Central Bank of West African States).

Many AFRITAC projects will strengthen capacity-building programs already
under way. Among the examples: In Mali, the authorities are fortifying
tax administration and public spending management, as well as employing
a new budget classification system to monitor poverty-reducing spending.
Benin and Niger are building capacity in tax administration and public
expenditure management. And Guinea is showing progress in improving the
country's statistical database and setting up a computerized budget monitoring
system.

If the two centers establish successful track records, three more centers
could be established, which would allow all sub-Saharan countries to
participate in the most up-to-date form of technical assistance available
in the developing world.

The IMF's work in the area of technical assistance is explained in a
new publication, "IMF Technical Assistance: Transferring Knowledge
and Best Practice. The 56-page pamphlet explains technical assistance
partly through case studies from around the world.

Examples include capacity building in Africa; the fight against money
laundering; assistance to central banks in Lithuania and Poland; advice
on tax reform; the strengthening of trade policy; and assistance in setting
up treasuries in transition economies. The IMF's work in post-conflict
situations is highlighted with a first-person account of the rebuilding
of economic institutions in Bosnia and Kosovo, as well as examples from
Afghanistan and Timor Leste.

The pamphlet also explains how the training programs of the IMF Institute
complement technical assistance work. "Providing technical assistance
to member countries—particularly developing countries and countries
in transition—is among the IMF's most important jobs. Yet this
major component of our work is relatively unknown to the public at large," Eduardo
Aninat, former IMF Deputy Managing Director responsible for technical
assistance, writes in a forward. "It plays a vital role in laying
foundations for stronger economies and for a better future for the people
of many countries of the world."

Aimed at the general public, the pamphlet is free. The English and French
versions have recently been published, and versions in Spanish and Arabic
will be available shortly. Russian and Chinese versions are expected
in September.

I recently launched an initiative to spark dialogue with the NGO community
in Cambodia through a series of roundtable discussions. The interaction
grew out of the Fund's interest, in the context of PRSP discussions,
to hear civil society's views of policies to speed up and sustain poverty
reduction in Cambodia.

The first roundtable was held on June 19, 2003, in Phnom Penh, with
representatives from international and Cambodian NGOs who had been invited
to discuss revenue policies. The session began with a presentation on
Cambodia's fiscal situation, the scale of the revenue challenge and,
in particular, the policy and administrative reforms to boost revenue
performance. The subsequent discussion brought a surprise: despite the
availability of documentation on the program in Cambodia, participants
knew little about extensive efforts to broaden the country's revenue
base.

They welcomed the initiative. Representatives seemed especially pleased
about the "fairness" aspect of revenue work—that improving
compliance and broadening coverage is aimed at improving equity. Specific
proposals made by the NGO representatives included introduction of a
progressive land tax to discourage land speculation; tax reductions on
agricultural inputs to improve agricultural competitiveness and help
diversify production; and the reduction or elimination of various fees
collected at the provincial level (which by one estimate reach 70 percent
of the price of products at delivery) to reduce disincentives to rural
entrepreneurship.

Several topics for future discussion were identified: the budget formulation
process; expenditure policies; conditionality under the PRGF; trade policy
and WTO accession; and governance. The next roundtable was scheduled
for July 16, 2003, for a discussion of governance and corruption.

Can a microfinance experiment provide lessons for macroeconomic and
financial stability? For Honduras, the answer is a yes. Fund staff had
the chance to hear directly from farmers about the benefits of "Monedero
Banadesa", a new microfinance project that provides credit to
the owners of small farms. The meetings were held last February as part
of a Financial System Assessment
Program (FSAP) that gauged the soundness of the country's financial
system.

Monedero Banadesa is a successful approach to agricultural credit.
The program, targeted at the smallest farmers, not only provides financing
but, most importantly, also offers mandatory crop insurance. In an economy
that depends on a few agricultural commodities, crop insurance is a major
public policy issue. Falling farm commodity prices hit all farmers, causing
problems throughout the economy and financial system. Knowing this, no
individual farmer has an incentive to obtain insurance, anticipating
that a mass of claims could cause insolvency throughout the insurance
industry, which would require a government bailout. Therefore, policymakers
are looking for alternative ways to ensure that individual farmers are
properly protected against shocks.

The Monedero Banadesa experiment is still in its early stages,
and time will reveal aspects that need improvement. But the mission from
the Monetary and Financial Systems Department learned from Hondurans
how grassroots solutions can be applied at the macroeconomic level.

A roundup of recent Western Hemisphere
Department contacts with civil society

Edited by Leonardo Cardemil, Advisor, Western Hemisphere Department

In Dominica, staff met with news media and with a wide range
of civil society representatives, including labor union officials, to
gauge public support for a Fund-supported program that is being negotiated.
Discussions centered on how to design policies that would move the economy
forward. Civil society members consulted included staff of the "Integrated
Development Plan," an organization with civil society representation.

An Article IV mission to the Dominican Republic to evaluate and
discuss the state of the economy and financial system in February included
discussions with key business and labor groupings. Meeting with members
the National Council of Private Enterprises (CONEP) and the National
Council of Labor Unions, staff explained the aims of IMF surveillance.
Specific issues included the role of fiscal discipline in limiting inflation,
the power of free trade to produce more jobs and lower prices; and the
need to avoid over-reliance on public sector employment, which can divert
resources from priority social spending. Union activists agreed that
public sector employment was inflated, though they were skeptical of
the promised benefits of free trade, putting more emphasis on the potential
for job loss. Private sector representatives urged staff to advise the
government to tighten fiscal controls. They also advocated a Fund program.

In Ecuador, a staff visit undertaken for a one-year review of
the Stand-By Arrangement included meetings with national and foreign
CSOs. These included representatives of the indigenous community, Jubilee
2000, a UN-sponsored Fiscal Transparency Forum, and private sector associations.
Talks centered on economic and social policies aimed at establishing
sustainable economic growth and poverty reduction, as well as the impact
of debt obligations. First Deputy Managing Director Anne Krueger joined
staff for part of the trip, visiting Quito and Guayaquil for discussions
with indigenous and business-sector associations. Follow-up discussions
included talks with academics and religious leaders on environmental
concerns and debt problems in light of Ecuador's high poverty rate.

In Nicaragua, Resident Representative Luis Breuer held a series
of meetings with civil society organizations. Participants included the
Papal Nuncio, Cardinal Miguel Obando y Bravo, as well as members
of Quakers International (QI) and of the Civil Society Coordinating Council
(CC—Coordinadora Civil), an umbrella organization. Discussions
focused on the Poverty Reduction Growth Facility (PRGF), as well as CC
complaints about perceived lack of transparency in the government's negotiating
practices. QI members argued for assignment of debt relief gains to domestic
social programs. Mr. Breuer responded that a large part of the debt
relief is associated with only nominal (legal) debt reduction and does
not represent cash savings that could be channeled to social programs.
However, savings derived from the interim assistance that Nicaragua currently
receives under the Heavily Indebted Poor Countries (HIPC) Initiative—which
represents reductions in actual service payments to the IFIs and other
donors—were being channeled into social programs, under Fund and
World Bank monitoring.

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Other recent meetings
between IMF staff and CSOs

On May 5, Hans Peter Lankes, Chief of the Trade Policy Division of
the Policy Development and Review Department (PDR) and World Bank staff
met a small group of civil society representatives at IMF headquarters
in Washington to discuss questions concerning the IMF's role in
the WTO, and other trade-related issues.

On May 22, Mario Garza and Michael Papaioannou from the Honduras
mission met with three Honduras and Washington NGO representatives
at IMF headquarters. Topics included Poverty and Social Impact Analysis
(PSIAs), privatization, trade liberalization, the global coffee market,
financing the PRSP and fiscal policies.

At the request of a group of NGOs, PDR Director Timothy Geithner,
met with three NGO representatives at IMF headquarters on June 16 to
discuss the status of the paper on the role of the Fund in low-income
countries; the Independent Evaluation Office review of prolonged
use of Fund resources; and Masood Ahmed's departure from the Fund.
PDR Deputy Director Mark Allen and Advisor Brian Ames also attended.

On June 18, External Relations Department Director Thomas Dawson
hosted a reception for CSOs and other organizations to bid farewell
to Masood Ahmed at IMF headquarters in Washington.

On June 20, APD economist Enric Fernandez, and Wayne Camard of EXR
participated in a meeting at the World Bank in Washington with Amnesty
International (AI) USA representatives on Sri Lanka. Topics discussed
were the current work of the Bank and the Fund in Sri Lanka, the Tokyo
donor conference and the relevance of AI's current human rights concerns
to that.

Mexico's Deputy Secretary of Finance and former IMF Executive Director
Agustín Carstens will succeed Eduardo Aninat as Deputy Managing
Director of the IMF on August 1. Aninat, a Chilean national and former
Finance Minister of Chile, announced
his departure in March. He had joined the
IMF in December 1999. In his farewell
interview in the IMF Survey, Aninat stressed Africa's need for
capacity building.

IMF Managing Director Horst Köhler notified the IMF Executive
Board of his intention
to appoint Professor Raghuram Rajan, a distinguished economist
at the University of Chicago Graduate School of Business, to the position
of Economic Counsellor and Director of the Research Department at the
IMF. He will succeed Kenneth Rogoff, who earlier announced his
decision to return to academia in the Fall of 2003.

Current and Upcoming Events

The Annual Meetings of the
Governors of the IMF and the World Bank will take place in Dubai,
United Arab Emirates on September 23-24, 2003 with a number of other
official meetings taking place in the preceding days. A number of
dialogues for interested civil society representatives will be organized
by the World Bank and IMF during the week of the September 18-24,
2003. Registration information for CSOs can be found on the Annual
Meetings website.

The Fourth
Annual Research Conference will take place in Washington, DC
on November 6-7, 2003. This year's conference will be devoted to
Capital Flows and Macroeconomic Cycles. More detailed information
will be posted closer to the conference.